Will Washington Kick-start the U.S. Battery Biz?

The United States will need a domestic lithium-ion manufacturing industry to meet its plug-in goals

french factory

The nearest manufacturer to the United States of lithium-ion batteries for hybrids is Johnson Controls-Saft’s plant in Nersac, France.

During his presidential campaign, Barack Obama promised to put 1 million plug-in hybrids and electric vehicles on U.S. roads by 2015, one of several steps toward energy independence. But getting there, say auto industry analysts, will require a heavy dose of government intervention and, crucially, the rapid construction of a domestic industry to manufacture advanced batteries. U.S. industry groups are pushing strongly for both.

Widespread penetration of plug-in cars remains far in the future. A Boston Consulting Group study predicts that under current trends, just 5 percent of new cars sold in the United States in 2020 (roughly 750 000 vehicles) will be plug-ins. Even 1 million plug-ins would still be less than one-half of 1 percent of the entire U.S. vehicle fleet of 250 million, but they would be more than 1000 times as much as the number on U.S. roads today.

The biggest impediment to Obama’s goal is an insufficient supply of lithium cells, whose high energy density will enable viable plug-in vehicles, says Brian Wynne, president of the Washington, D.C.–based Electric Drive Transportation Association. Global capacity is tight for all automotive electric-drive components—motors, controllers, inverters—but especially so for large lithium-ion cells.

Automakers prefer nearby suppliers, to reduce risk and cut shipping costs. But while General Motors will build battery packs for its plug-in Chevrolet Volt in Michigan, the cells inside them will come all the way from South Korea, because lithium-ion cells aren’t manufactured in volume anywhere in the United States. ”It’s important to be able to manufacture cells here, to control our own destiny,” says Wynne. If electric drive takes off in other regions, he says, U.S. carmakers could be frozen out of limited supplies.

To build enough plants to supply cells for 1 million Volt-style plug-ins a year—16 plants at, say, US $300 million each—might cost $5 billion. But first, cell makers need ”a big customer contract,” says Mary Ann Wright, CEO of lithium battery supplier Johnson Controlsâ¿¿Saft. Beyond that, ”we need a sane and rational energy policy” to stabilize gas prices, giving predictability to an industry that now makes billion-dollar bets years before cars go on sale. Such an energy policy, she says, would include low-interest loans to viable manufacturers, outright grants to jump-start the industry, and aggressive conversion of government fleets to electric drive, to stimulate demand.

As it happens, Johnson Controls-Saft owns the closest plant to the United States that produces automotive-grade lithium cells; it’s in Nersac, France. Although the United States is home to attention-getting lithium-ion start-ups, including venture-funded A123 Systems, these firms currently lack the domestic manufacturing capacity to supply automakers. But cell makers understand the importance of manufacturing near their customers; A123 Systems promises plants in southeast Michigan if it receives funding. And in October, 14 U.S.-based battery makers formed the National Alliance for Advanced Transportation Battery Cell Manufacturers, joining a chorus of other advocates for policies that will build a local cell supply base.

”We have a perfect window of opportunity to create a U.S. infrastructure,” says Wright. ”We have the technology, we will have the customers, and we know how to make cells.” Cell manufacturing plants take two to three years to come onstream, so plants funded this year might supply cars for model year 2013. But, Wright says, it has to happen now. ”I don’t think we even have a year” to ensure that U.S. plants are built on the same timeline as those now planned in other regions, she says.

Already, advocates can point to pending government help in the form of low-interest loans for producers and tax credits for consumers contained within recent finance and energy bills.

Asked to handicap the chance that the United States will get lithium-cell plants, Tony Posawatz, vehicle line director for the Chevrolet Volt, and a man who is intimately enmeshed in the politics of electric-car manufacturing, smiles broadly. ”I think from April to June you’ll see a lot happening,” he says.